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Calvin Harrison, director of Providence Cancer Center, says Providence carefully weighed the need for more cancer beds before building its tower.

Cynthia Mills

Contributing Writer

(Page 3 of 4)

The recent opening of two hospital floors and 60 new beds for cancer patients at Oregon Health & Science University, extended a dramatic expansion of cancer care services for Portlanders.

The widely available services, from screening to treatment, are without doubt a boon for cancer patients, who can now expect more advanced treatments in more amenable surroundings. But it might not be so good for health care in general.

Hospitals arguably are engaging in a medical arms race where they compete for patients or even just medical glory and prestige. The hospitals say, however, that the demand for the added capacity either already exists or soon will. The cancer care expansions in Portland affect both hospital and outpatient cancer capacity. Providence Portland Medical Center opened its $204 million, 11-story cancer center in 2008, representing a net gain of 24 oncology beds; Kaiser Sunnyside Medical Center opened an $88 million wing partly dedicated to cancer care, with a net gain of five oncology beds, in January; and Oregon Health & Science University opened two new floors with 60 new beds in February.

That adds up to 89 new beds for cancer patients among all these new facilities, and Providence alone added a new linear accelerator (to generate radiation for radiation therapy) with a price tag of $2.5 million not to mention recruiting some 200 full-time employees, including 13 medical oncologists, according to Calvin Harrison, director of Providence Cancer Center.

“Cancer is on the increase as the population ages,” Harrison said.

He cites a 5 percent increase in cancer diagnoses in the past few years, and an average of 4,000 new cancer patients diagnosed per year in Oregon. The median age at which patients are diagnosed with cancer is 66 — just about the age of the leading edge of the baby boom population.

Also, although currently stalled, all estimates predict Portland’s population growth will continue.

Harrison and Adam Nemer, chief financial officer for Kaiser Sunnyside, assert that their organizations did not make decisions to expand lightly. Both said their cancer facilities were approaching capacity and that expanding was better done from the ground up and not piecemeal.

All three new facilities tout their patient services as not only more efficient, with bedside computer record systems, but also more comfortable for patients. Providence has made efforts to improve doctor-based care, as well, adding primary care physicians to oversee and coordinate all care for patients. The new beds at Kaiser and Providence are private, with additional accommodations for visitors, including overnight visitors.

But the increase may not be all for patient comfort — there is business logic at work here, too. Nationally, Harrison cites a trend for increased revenue for all oncology-based services, so that 18 to 20 percent of hospital revenue comes from cancer treatments. There are more cancer patients and treatments are more effective, meaning that cancer patients live longer and require treatment over longer periods of time — all a formula for a steady stream of income.

In the meantime the stumbling economy is dragging hospital income down with it. According to a spokesperson for Providence, charity costs — nonpaying patients — have skyrocketed since 2007 Providence Health System for all of Oregon reported a fall in operating income from $159 million to $144 million from 2007 to 2008.

This reflects a trend for all hospitals in Oregon, said Andy Van Pelt, director of communications of the Oregon Association of Hospitals and Health Systems. Where a 4 to 5 percent operating margin is considered healthy, the average for Oregon hospitals is 3.7 percent, with some hospitals, mostly in rural areas, reporting negatives.

With 17 percent of Oregon’s population currently uninsured and predictions nationally that one of five will be uninsured in the future, trends for hospital revenue streams do not look sunny.

Lynn-Marie Crider, health care policy analyst for the Service Employees International Union, Local 49, is critical of the recent expansions, and favors a return to more rigorous state oversight.

She recalls the initial adoption of certificate of need laws. In the 1970s governments reacted to what was seen as a medical arms race, where hospitals competed to be the first with the latest new equipment and services, sometimes quickly scrapping functional equipment simply because it wasn’t the newest and best. It was an age of “an MRI on every corner.”

“The prevailing theory was, quite rightly, that market doesn’t adequately regulate entry into health care — the public is a captive audience — the people who ‘own’ health care set the price and tell us that we need their services.”

Crider cited a recent study out of Dartmouth University, a regional analysis showing that the extent of patient care was more influenced by what services were available, and that even with more services, the results, patient satisfaction and health, were equal to areas with moderately less care.

Expanded services, Crider says, can hurt the public. Costs for these expansions have to be recovered, driving up health care costs.

“The incentives to adopt cost-increasing procedures are large, because someone can get paid for them,” says Rajiv Sharma, health economist for Portland State University.

Procedures that cut costs are less popular, he says, because they are less likely to generate new income. And new, cutting edge technologies impart status to hospital, making them more attractive to both patients and prestigious doctors.

Hospitals, and their expansions and equipment purchases, are a supply-side phenomenon, said Oregon Rep. Mitch Greenlick. If they are built, they will be used. But without patients having a say in the form of demand for the product — their oncologists dictate where patients will stay based on factors related to their own practices — the marketplace is inefficient.

Greenlick also thinks the certificate of need should be broadened to again govern hospital expansions. This year he co-sponsored HB 3261, worded to achieve that result.

The bill is dead, but Greenlick said that HB 2009, the bill that would eventually create a health insurance plan for the public, sets the stage for revisiting the certificate of need.

HB 2009, approved by the House on June 8 and now headed to the Senate, also creates the Oregon Health Authority, a single agency to oversee health care issues.

“Certainly one question for (the authority) to deal with is the kind of irrational expansion of health care facilities” illustrated by the cancer centers, he said.

Special Sections Editor Robert Goldfield contributed to this story. Contact rgoldfield@bizjourals.com and 503-219-3416.

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